High court victory for managers

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Arbitration agreements between personal managers and their clients supersede the ability to argue contract disputes before California's labor commissioner in some cases, the U.S. Supreme Court ruled Wednesday.

The 8-1 decision represents a victory for managers by clearing up a blurry line as to whether all Talent Agency Act disputes automatically go to the labor commissioner, thus allowing managers with arbitration clauses to resolve their disputes in another forum.

"The labor commissioner has been harsh to managers over the past couple decades, and this gives managers a whole new level of playing field," entertainment litigator Neville Johnson said. "It allows managers to participate in the selection of a neutral, which they didn't have before."

The court held the Federal Arbitration Act overrides state law that refers certain cases to administrative or judicial proceedings for resolution, including TAA disputes that go before the Labor Commission.

In the underlying case, manager Arnold Preston initiated arbitration proceedings against his former client, Alex Ferrer of TV's "Judge Alex," over unpaid commissions.

The contract between the two called for arbitration of disputes, including those questioning the validity or legality of the contract.

In arbitration hearings, one appointed arbitrator acts as judge and jury, weighing the evidence and then ruling on the case, which is binding and cannot be appealed. Arbitration is often seen as a quick, efficient and relatively inexpensive way to resolve disputes.

But after Preston petitioned for arbitration, Ferrer responded by filing a complaint with the state's labor commissioner, challenging the legality of the entire management agreement and claiming Preston acted as an unlicensed talent agent. Preston denies that allegation.

The labor commissioner ruled that it had no power to stop the arbitration proceedings, so Ferrer filed suit in Los Angeles Superior Court. There, the court granted his request to stop the arbitration, and appeals court justices upheld that decision.

But the Supreme Court, asked to determine who should decide whether Preston acted as a personal manager or talent agent, found arbitration clearly was the correct place to resolve that dispute.

"We hold today that, when parties agree to arbitrate all questions rising under a contract, state laws lodging primary jurisdiction in another forum, whether judicial or administrative, are superseded by the FAA," Justice Ruth Bader Ginsburg wrote.

The lone dissenter, Justice Clarence Thomas, wrote in a brief dissent that he believes the FAA does not apply to proceedings in state courts.

Preston and his attorney, Joseph Schleimer, said they were pleased by the decision.

"I think it was a tremendous mistake that the (state) court didn't recognize my client's right to arbitrate," Schleimer said. "It's kind of mind-boggling that we had to go this far."

Preston said he looks forward to the arbitration proceedings and added, "It's unfortunate the honorable Judge Alex attempted to not abide by his contract with me, thereby causing lengthy delay and incurring excessive and unnecessary costs."

Ferrer, through his attorney, Robert Dudnik, said he was disappointed by the decision.

Dudnik said he didn't think the decision would change the landscape of manager-client contracts, with artists refusing to sign agreements in which arbitration clauses are included.

"Most artists are not that sophisticated," he said. "They get a personal manager. They'll get a contract. They'll see the word 'arbitration' and it won't mean anything."

"I suspect all of the personal managers will include arbitration provisions and virtually all of the artists will not realize the importance of all that," he added.